Guidelines under clause 10D of section 10 of the income tax act 1961
Circular No. 15/2023 was issued by the Central Board of Direct Taxes on 16 August 2023. Its subject is Guidelines under clause 10D of section 10 of the income tax act 1961.
These are guidelines issued under a power in the section itself. Where a section says the Board may issue guidelines and that they bind, the guidelines carry more weight than an ordinary circular — read the enabling words before deciding which kind this is.
Introduces the Board's guidelines under the ninth proviso to clause (10D) of section 10 on the new premium ceilings for life insurance policies. The extract explains the position the guidelines are meant to work out: from assessment year 2024-25, a sum received under a life insurance policy other than a unit linked policy, issued on or after 1 April 2023, is not exempt if the premium payable for any previous year during the term exceeds Rs. 5,00,000 (sixth proviso); where premium is payable on more than one such policy, exemption is confined to those policies whose aggregate premium does not exceed Rs. 5,00,000 in any previous year during the term of any of them (seventh proviso); and neither restriction touches a sum received on the death of a person (eighth proviso). What falls outside clause (10D) is taxed under the new clause (xiii) of section 56(2) as income from other sources, on the excess of the sum received over the aggregate premium paid during the term and not claimed as a deduction elsewhere, computed as prescribed, with section 2(24) widened by a new sub-clause to take that in.
The ninth proviso to clause (10D) empowers the Board, with the previous approval of the Central Government, to issue guidelines to remove difficulties in giving effect to the clause; the Board is exercising that power for the new premium tests.
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F. NO.370142/28/2023-TPL
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
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Circular No. 15 of 2023
Dated tbe 16th August, 2023
Sub: Guidelines under clause (lOD) of section 10 oftbe Income-tax Act. 1961- reg.
Clause (100) of section IO of the Income-tax Act, 1961 (the Act) provides for
income-tax exemption on any sum received under a life insurance policy, including the sum
allocated by way of bonus on such policy subject to certain exclusions.
2. The Finance Act, 2023 (Finance Act), inter-alia,-
l. amended clause (100) of section 10 of the Act by substituting the existing sixth
proviso with the new sixth, seventh and eighth provisos to, inter-alia, provide that:
(i) with effect from assessment year 2024-25, the sum received under a life
insurance policy, other than a unit linked insurance policy, issued on or after
the 151 day of April, 2023, shall not be exempt under the said clause if the
amount of premium payable for any of the previous years during the term of
such policy exceeds Rs 5,00,000 [sixth proviso];
(ii) if premium is payable for more than one life insurance policy, other than a
unit linked insurance policy, issued on or after 01.04.2023, the exemption
under the said clause shall be available only with respect to such policies
where the aggregate premium does not exceed Rs 5,00,000 for any of the
previous years during the term of any of those policies [seventh proviso];
(iii) the sixth and seventh provisos shall not apply in case of any sum received on
the death ofa person [eighth proviso]
I!. inserted a new clause (xiii) in sub-section (2) of section 56 to provide that where any
sum is received, including the amount allocated by way of bonus, at any time during
a previous year, under a life insurance policy, other than the sum,-
r Circular No. 15 of 2023
a. received under a unit linked insurance policy, or
b. being the income referred to in clause (iv) of sub-section 2,
which is not to be excluded from the total income of the previous year in accordance
with the provisions of clause (I OD) of section 10, the sum so received as exceeds the
aggregate ofthe premium paid, during the term of such life insurance policy, and not
claimed as deduction in any other provision of the Act, computed in the manner as
may be prescribed shall be chargeable to income-tax under the head "Income from
other sources";
III. inserted a sub-clause (xviid) in clause (24) of section 2 to provide that income shall
include any sum referred to in clause (xiii) of sub-section (2) of section 56.
2.1 It may be noted that Finance Act, 2021 had earlier inserted, fourth to seventh provisos
in clause (I OD) of section 10 to provide that the sum received under any unit linked insurance
policy [ULIPj (except any such sum received on the death of a person), issued on or after the
01.02.2021 shall not be exempt under said clause, if the amount of premium payable for any
of the previous years during the term of such policy exceeds Rs 2,50,000 (fourth proviso). It
was also provided that if the premium is payable for more than one UUPs, issued on or after
the 01.02.2021, the exemption under the said clause shall be available only with respect to
such policies where the aggregate premium does not exceed Rs 2,50,000 for any of the
previous years during the term of any of the policies (fifth proviso).
Issuance of Guidelines for removal of difficulties
3. Ninth proviso to clause (I OD) of section 10 of the Act also empowers the Central
Board of Direct Taxes (Board) to issue guidelines, with the previous approval of the Central
Government, in order to remove any difficulty which arises while giving effect to the
provisions of the said clause. In exercise of the powers under this proviso, Board, with the
previous approval of the Central Government, hereby issues the following guidelines.
On a maturity or survival payout from a high-premium policy issued after 1 April 2023 — in the insurer's tax deduction, in the annual information statement entry, and in the section 56 head of the return for assessment year 2024-25 onwards.
It mentions. Circular No. 15/2023
Source: the Income Tax Department’s own published text — its page for this instrument.